James Murdoch tonight launched a scathing attack on the BBC, describing the corporation's size and ambitions as "chilling" and accusing it of mounting a "land grab" in a beleaguered media market.

News Corporation's chairman and chief executive in Europe and Asia also heavily criticised media industry regulator Ofcom, the European Union and the government, accusing the latter of "dithering" and failing to protect British companies from the threat of online piracy.

Delivering the MacTaggart lecture at the MediaGuardian Edinburgh International Television Festival 20 years after his father Rupert, Murdoch described UK broadcasting as "the Addams Family of world media", comparing it unfavourably with the industries in India and France and complaining about the "astonishing" burden of regulation placed on BSkyB, the pay-TV giant he chairs. "Every year, roughly half a million words are devoted to telling broadcasters what they can and cannot say," he said.

However, his most withering comments were reserved for the BBC. "The corporation is incapable of distinguishing between what is good for it, and what is good for the country," he clamed. "Funded by a hypothecated tax, the BBC feels empowered to offer something for everyone, even in areas well served by the market. The scope of its activities and ambitions is chilling."

He described the BBC's purchase of the travel guide publisher Lonely Planet as a "particularly egregious example of the expansion of the state" and compared government intervention in broadcasting with failed attempts to manipulate the international banana market in the 1950s.

Murdoch added that the BBC's news operation was "throttling" the market, preventing its competitors from launching or expanding their own services, particularly online. News International, the News Corp subsidiary that owns the company's British newspapers, including the Sun and the Times, is currently considering introducing charges for all its websites.

"Dumping free, state-sponsored news on the market makes it incredibly difficult for journalism to flourish on the internet. Yet it is essential for the future of independent journalism that a fair price can be charged for news to people who value it," he said.

He added: "We seem to have decided to let independence and plurality wither. To let the BBC throttle the news market, and get bigger to compensate."

His outspoken attack prompted an immediate response from the BBC Trust chairman, Sir Michael Lyons. "British broadcasting is admired around the world", he said. "Its diversity of broadcasters and their variety of funding methods is a strength and not a weakness. The public tell us that they ... trust the BBC and value the wide range of services we provide. The BBC Trust ... is here to strengthen the BBC for the benefit of licence fee payers, not to emasculate it on behalf of commercial interests."

Murdoch's broadside against the BBC came after the shadow culture minister, Ed Vaizey, clashed with Jana Bennett, the BBC director of vision and the most senior corporation executive in Edinburgh, over the corporation's refusal to publish the pay of top stars such as Jonathan Ross.

Bennett said performers had a different role from policeman or teachers and that making talent salaries public could lead to price-setting by politicians. "We have said that we look at block spend [total amount] on talent because that could be meaningful to the public," she added.

Vaizey hit back by saying that a politician caught on camera saying the public did not understand why cash needed to be paid to MPs would be seen as an "outrage".

Murdoch's outspoken attack on the British broadcasting establishment echoes comments made by his father, who delivered the MacTaggart lecture in 1989. Murdoch Sr lambasted the "anti-commercial attitudes" of the British broadcasting establishment, particularly the BBC.

His youngest son, who many believe is being groomed to take over from his father at the helm of the media empire, described the £3.7bn a year licence fee as a "regressive tax" and argued that the BBC should be scaled back.

"We have a system in which state-sponsored media – the BBC in particular – grow ever more dominant. If we are to have that state sponsorship at all, then it is fundamental to the health of the creative industries, independent production, and professional journalism that it exists on a far, far smaller scale."

Murdoch described the British broadcasting system, with a dominant BBC at its heart, as "authoritarian".

"Would we welcome a world in which the Times was told by government how much religious coverage to carry?" he asked. "In which there were a state newspaper with more money than the rest of the sector put together and 50% of the market?"

He also launched a furious attack on Ofcom. "The repeated assertion by Ofcom of its bias against intervention is becoming impossible to believe in the face of so much evidence of the opposite."

Ofcom is conducting an investigation into BSkyB's grip on the pay-TV market. In its preliminary findings in June, the regulator said that the satellite broadcaster should be forced to sell its premium content, including Hollywood films and Premier League matches, to rival broadcasters for up to a third less than it currently charges. BSkyB has said it will challenge the ruling in the courts.

A spokesman for Ofcom said tonight: "Ofcom welcomes Mr Murdoch's contribution to the debate on future regulation. Ofcom is committed to its duty to protect consumers' and viewers' interest and to promote competition and innovation based on thorough and objective evidence and analsysis."

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